Ghana will not default on Eurobond repayment – ​​Report


Ghana will not default on its Eurobonds awaiting maturity, investment bank IC Securities predicted in its Ghana brief.

According to one of the country’s leading investment firms, a $750.0 million loan from the African Export-Import Bank, the $1.3 billion syndicated cocoa loan and revenue windfall tankers will help strengthen the country’s reserves and prevent any defaults.

The country has $16 million on the $1 billion Eurobond issued on August 7, 2012 due. This was after its initial issuance with a principal amount of $750 million, due to the reprofiling of part of the country’s debt.

IC Securities said: “Unlike its local counterparts, we do not believe a default on Ghana’s Eurobonds is imminent as the country will benefit from the (hopefully) $750 million loan from the African Export-Import Bank, a $1.3 billion syndicated cocoa loan and windfall from its oil revenues.These inflows are expected to shore up Ghana’s foreign exchange reserves before an International Monetary Fund [IMF] bailout in the next 6-8 months”.

“We don’t believe a Eurobond default is imminent. Especially because the cost of servicing debt on Eurobonds is currently low, at 12.2% of total revenue and grants. This significantly reduces the possibility of a default on Eurobonds within the next six months, ceteris paribus,” he added.

Furthermore, he said that “even when we factor in Ghana’s balance of payments pressures, the risk profile of the Eurobond changes slightly, but not by much. And in the worst case scenario, if Ghana were to default on its Eurobonds, the following scenario would play out. At the current price of 47.0 cents to the US dollar, investors could find themselves firmly in the money, even at a steep 40.0% discount.”

IMF bailout provides policy guidance but won’t avert impending debt restructuring

IC Securities said the IMF bailout provides policy guidance, but will not avert impending debt restructuring.

Again, it’s sad that if a smooth bailout is secured within the next eight months, it should provide some level of certainty and policy guidance.

“Investors could also have the opportunity to fairly revalue Ghana’s assets. This should help revive consumer and business confidence levels, both of which are at devastating levels,” he said.

“And while we don’t expect the bailout to avert debt restructuring, we believe it will encourage policymakers to take interim measures that can ease the fiscal burden,” he added. .


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